The Science
Of Sales Growth In A Recession:
The 5 Most Dangerous Mistakes

By Nicholas
Read

As the global
economy continues to tighten, most businesses appreciate they won’t
get different results by doing things the same way. But much of the
science for growing in a recessionary market is counter-intuitive,
and managers whose hands were on the rudder in previous downturns
are no longer in the workplace. Few of today’s executives therefore
have ever faced this kind of storm in their career.

It’s a situation
primed for old mistakes to be made all over again. Former
executives of Fortune companies and start-ups, who captained the
ship through the ‘70s stock market crash to the ‘90s dot-com bubble,
reveals some useful home truths. They report a range of signs that
it’s time to rethink how your company sells:

Tenders appear
to be an exercise to justify decisions that are already made,
and not a serious opportunity to win the business.

Key customers
slash budgets or rationalize their number of suppliers.

Deals you
thought were ‘hot to trot’ go ‘off the boil’.

Your pipeline
bloats with opportunities stuck in a holding pattern, with the
seller not achieving any forward progress for several months.

Decisions
become more complex, involving more people and taking longer to
get across the line.

Price and risk
mitigation become main topics for discussion in the negotiation
phase.

Sales are for
amounts far less than forecast.

Salespeople
spend time on low-yield activities like prospecting because the
quality and quantity of leads from Marketing is too low or dries
up.

Your forecast
is murky when you look out further than six months.

You win deals,
but can’t repeat success across the sales force.

You lose deals
and don't know why, or when it became irrecoverable.

Good
salespeople bail out into management roles in other departments
or leave the company altogether.

When organizations
are dealt with these challenges, their typical gag reflex is to:

Spend more on
advertising.

Cut back on
salespeople.

Cut back on
training coaching.

Cut back on
pricing.

Tell
salespeople to “work harder and smarter”.

So what happens
next?

A downward
spiral commences.

Managers focus
on activity metrics and demand more calls, more leads, more
proposals.

Managers start
weighting the forecast report, which sends the message they
don't trust their team.

Salespeople
invite managers to help close their big deals, knowing that if
the manager can’t win, the salesperson is off the hook.

Customers
invite managers to attend the final pitch, knowing they can
approve larger discounts.

Coaching stops
as managers don the cape of “SuperRep”.

Non-standard
promises made in the heat of battle are off-menu for what the
delivery team actually does, establishing a gap between the
customer’s expectations and what they then experience.

Repeat business
drops, as promises are not met.

Margin erosion
begins.

Managers focus
on even more activity metrics, more calls, more leads, and more
proposals.

The downward
spiral gets deeper and deeper...

If any of these
danger signs look familiar, you’re in good company. Most executives
who turned their companies around in former recessions first fell
into the same traps because they represent a natural response in
times of uncertainty. People go to risk and get tactical.

But these same
executives report the secret to pulling out of the nosedive is to
act contrary to the natural impulse, keep your head, and take a
contrarian path. Those that did so achieved stability and even
growth while their competitors fell by the wayside. They cite the
five most dangerous mistakes a company can make as:

1. Ignoring
the problem: Fear and panic can
cause indecision. When they do, business leaders can fail to
evaluate options rigorously, and so make inappropriate decisions to
maintain the status quo. Poor choices—or safe choices made too
late—cause a company to go backwards. When the warning signs appear,
take swift action.

2.
Increasing advertising: For fast moving
consumer goods, brand advertising can sway preference and so take
market share away from competitors in the short-term. But in complex
B2B sales, advertising does not lift short-term revenue because
institutional buying decisions require a protracted period of
assessment that outlasts most advertising campaigns. So don't
advertise and expect an impact on B2B sales this year. However
consulting firm PIMS Associates1 reports how companies that
advertise more end up growing faster over the long-term than firms
that drop off the customer’s radar, seemingly swallowed by the
downturn.

3. Cutting
the price: Buyers in a tight
market will naturally gravitate to low prices. But this simply
reduces your margins, which must be paid for by cutbacks to
operating expense elsewhere. It leads to short-term gain but
long-term pain; the loss of sustainability. Conversely in the B2B
space, higher prices positioned as necessary to reduce the
customer’s risk, actually plays better to executive perception than
“getting a cheap deal”. Sometimes putting your price up is the best
way to grow your market.

4. Freezing
sales expenses: Putting a hold on
sales costs such as travel, entertainment and training are typical
areas targeted by nervous CFOs. But a study reports: Only 27% of
companies that indulged in intensive cost cutting were growing as a
result of their pains.

5. Pushing
more calls: Pressuring
salespeople into making more intrusions on the same number of
prospects actually reduces sales. Neil Rackham (author of SPIN Selling and Rethinking the Sales Force)
concludes: “The least successful people are the ones making the most
calls. Increasing the call rate results in fewer orders, not more.”

To avoid
reinventing the wheel, learning from executives who weathered past
recessions is a sound approach to reducing risk. In your own
organization, your alumni or your online social network there may
reside active or emeritus officers with deep experience to share.
Talk to them. Pick their brains.

But one thing is
certain when an ailing economy mimics a black hole - piecemeal
remedies fail to achieve escape velocity. Cutting back on cost,
though logical, is the opposite of what has pulled businesses
through recessions in the past. Increased investment in the sales
process, governed by greater discipline, is a more reliable approach
for achieving sustainable revenue growth, even in difficult times.